Living trust - Financial definition
Concise definition of the term living trust
A living trust is a legal document created during an individual's lifetime that allows for the management and distribution of their assets. It can help avoid probate and provide privacy for the estate.
Comprehensive definition of the term living trust
A living trust, often used in estate planning, is designed to manage and distribute an individual's assets both during their life and after death. Unlike a will, a living trust allows for the immediate transfer of assets to beneficiaries upon death, bypassing the probate process, which can be lengthy and costly.
This type of trust can be revocable, meaning the grantor can alter or terminate it as long as they are alive, or irrevocable, which offers potential tax benefits and asset protection but cannot be changed once established. Living trusts are commonly used to ensure a seamless transition of asset management in the event of the grantor’s incapacity, to maintain privacy since they are not public records, and to potentially reduce estate taxes.